The US Dollar Index (DXY), which tracks the US Dollar against six major currencies, traded near 100.00 in early European hours on Thursday. It moved higher after a televised address by US President Donald Trump. Trump said US objectives in Iran were nearing completion and that involvement could last another two or three weeks. He also said the US was prepared to increase its military response during that period.

Dollar Index Reaction To Geopolitical Risk

Higher energy prices have supported expectations that the US Federal Reserve will keep interest rates unchanged. Futures pricing showed nearly a 52% probability of a Fed rate rise by the end of 2026, the first time this measure has been above 50%, according to CNBC. The next focus is the US employment report for March, due on Friday. Forecasts point to 60,000 Nonfarm Payrolls and an Unemployment Rate of 4.4%. If the data is weaker than expected, it could put downward pressure on the US Dollar against other currencies. Market participants will watch the figures for clues on the next move in the dollar and interest rates. We remember the pattern from early last year when Middle East tensions provided a floor for the dollar. Today, with renewed friction in the South China Sea, we see a similar flight to safety, which has helped push the US Dollar Index to its current level of 104.50. This environment suggests that buying call options on the DXY or USD-linked currency pairs could serve as a valuable hedge against further escalation.

Options Strategies For A Rate Pause

Looking back, the market’s expectation in early 2025 for a rate hike by the end of 2026 proved correct, as the Federal Reserve raised rates multiple times through last year. Now, the situation has shifted, with the current Fed funds rate at 5.75% and the CME FedWatch Tool indicating a 90% probability of a pause at the next meeting. Traders should consider strategies that profit from sideways movement in interest rates, such as selling strangles on Treasury note futures. The weak employment situation we saw in March of 2025, with Nonfarm Payrolls coming in below the dismal 60,000 forecast, feels like a distant memory. All attention is now on tomorrow’s jobs report for March 2026, where the market consensus is for a much healthier 185,000 jobs added and an unemployment rate holding at 3.8%. A significant deviation from this forecast will inject volatility into the market, making a long straddle on the USD/JPY pair an attractive play for the event. Create your live VT Markets account and start trading now.

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Gold prices in Malaysia fell on Thursday, based on FXStreet data. Gold was priced at MYR 605.00 per gram, down from MYR 616.90 on Wednesday. Gold dropped to MYR 7,056.48 per tola from MYR 7,195.45 a day earlier. Other listed prices were MYR 6,049.48 for 10 grams and MYR 18,817.49 per troy ounce. FXStreet converts international gold prices into Malaysian Ringgit using the USD/MYR rate and local measurement units. The figures are updated daily at the time of publication, and local rates may vary slightly. Gold is used as a store of value and a medium of exchange, and it is also used for jewellery. It is often used as a hedge against inflation and currency weakness. Central banks are the largest gold holders and may use gold to diversify reserves. They added 1,136 tonnes worth about $70 billion in 2022, according to the World Gold Council, the highest annual total on record. Gold often moves opposite to the US Dollar and US Treasuries, and it can also move against risk assets. Price drivers include geopolitical events, recession fears, interest rates, and USD moves, as gold is priced in dollars (XAU/USD). The recent dip in the local gold price, down to MYR 605.00 per gram, should be seen as short-term noise rather than a major trend reversal. We understand that gold is primarily influenced by global factors, not daily local adjustments. This slight pullback may offer a tactical entry point for traders anticipating renewed upward momentum. We must remember the immense demand from central banks, which has provided a powerful underlying support for prices. After they added a near-record 1,037 tonnes in 2023, we saw this trend of aggressive buying continue through 2024 and 2025, effectively creating a floor under the market. This consistent demand limits the potential downside for any significant period. The current interest rate environment is now more favorable for gold than it has been in years. After the cycle of rate cuts we saw the US Federal Reserve implement through 2025, the opportunity cost of holding a non-yielding asset like gold has significantly decreased. We should watch for any further signs of a weaker US Dollar to confirm the next leg up. For derivative traders, this period of consolidation is an opportunity to structure positions for future volatility. Buying call options or establishing bull call spreads could be a cost-effective way to gain upside exposure. These strategies are ideal for capturing a sharp price increase driven by geopolitical events or changing monetary policy. We are also watching the inverse correlation between gold and risk assets, as a rally in stock markets can weaken gold. However, with major equity indices looking overextended after their 2025 run, gold stands as a crucial hedge. Any sell-off in riskier markets would likely trigger a flight to safety, directly benefiting gold positions.

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The People’s Bank of China set Thursday’s USD/CNY central rate at 6.8880. This compared with the previous day’s fix of 6.9025 and a Reuters estimate of 6.8764. The PBoC’s main monetary policy goals are price stability, including exchange rate stability, and economic growth. It also works on financial reforms, such as opening and developing the financial market. The PBoC is owned by the state of the People’s Republic of China, so it is not an autonomous institution. The Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council, has key influence over management and direction, and Pan Gongsheng holds both this role and the governor post. The PBoC uses tools including the seven-day reverse repo rate, the Medium-term Lending Facility, foreign exchange interventions, and the Reserve Requirement Ratio. The Loan Prime Rate is China’s benchmark interest rate and affects borrowing, mortgages, savings rates, and the renminbi exchange rate. China has 19 private banks. The largest are digital lenders WeBank and MYbank, backed by Tencent and Ant Group, and rules allowing fully privately funded domestic lenders began in 2014. The People’s Bank of China has set a stronger fixing for the Yuan today at 6.8880, signaling a desire to guide the currency firmer against the US dollar. This move shows an intention to support the currency, but by setting it weaker than market estimates, the bank also indicates it wants to control the pace of appreciation. This suggests a period of managed stability rather than a sharp rally is likely. This managed strengthening aligns with recent positive economic data, as China’s Q1 2026 GDP growth surprised at 5.1% and March exports showed a robust increase. These figures provide the PBOC with the fundamental support needed to allow for gradual currency appreciation without spooking markets. We see this as a move to reflect underlying economic strength while maintaining overall stability. We recall the significant depreciation pressures experienced back in late 2025, which were driven by a slowdown in global demand and concerns over the property sector. The current policy stance feels markedly different, with officials now leaning against any potential weakness. This suggests a shift from defensive currency management to a more confident, controlled strengthening. Given this signal of managed stability, derivative traders should consider strategies that profit from low volatility in the USD/CNY pair over the coming weeks. Selling short-dated strangles or constructing iron condors could be effective ways to capitalize on the currency remaining within a defined range. These positions would benefit from our view that the PBOC will actively curb any sharp moves in either direction. The reliance on the daily fixing as the primary tool is noteworthy, especially as the PBOC has held its key one-year Loan Prime Rate steady at 3.45% for the last several months. This suggests that for now, the bank prefers subtle foreign exchange adjustments over broader monetary policy shifts. We believe this reinforces the outlook for a stable, tightly controlled currency environment for the near future.

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The People’s Bank of China set Thursday’s USD/CNY central rate at 6.8880. This compares with the prior fix of 6.9025 and a Reuters estimate of 6.8764. The PBOC’s main monetary policy aims are to keep prices stable, including exchange rate stability, and to support economic growth. It also works on financial reforms, such as opening and developing financial markets.

State Control And Leadership Structure

The PBOC is owned by the state of the People’s Republic of China and is not an autonomous body. The Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council, has strong influence over its management; Pan Gongsheng holds both the secretary and governor roles. The PBOC uses tools including a seven-day reverse repo rate, the Medium-term Lending Facility, foreign exchange intervention, and the reserve requirement ratio. The Loan Prime Rate is China’s benchmark rate and feeds through to loan, mortgage, and savings rates, and can also affect the renminbi exchange rate. China has 19 private banks, which make up a small share of the system. The largest are digital lenders WeBank and MYbank, and private capital was permitted to set up domestic lenders from 2014. The People’s Bank of China has set a notably strong reference rate for the Yuan, which signals a clear intention to support the currency. This move is significant given the ongoing economic pressures and the state’s direct control over the central bank’s objectives. Traders should interpret this as a sign that authorities will actively resist further rapid depreciation in the near term.

Market Implications For Traders

We have seen recent economic data for China that suggests a mixed recovery, with the latest manufacturing PMI for March 2026 coming in at a modest 50.1, indicating only slight expansion. Given that first-quarter GDP growth was 4.8%, just shy of the official target, ensuring currency stability becomes a key tool to maintain confidence. A stable exchange rate helps prevent capital outflows during periods of uncertain growth. This action comes as the interest rate differential with the United States remains wide, putting natural downward pressure on the Yuan. With US inflation still persistent at around 3.1% last month, the Federal Reserve is expected to keep its policy tight. This makes the PBOC’s intervention to strengthen the Yuan even more pronounced against the market’s underlying fundamentals. When we look back at 2025, we saw the central bank use this exact strategy multiple times to manage expectations whenever the dollar surged. This historical pattern shows that the daily fixing is a primary policy tool used to guide the market and push back against speculative pressure. Therefore, today’s strong fix is likely not an isolated event but part of a broader defensive playbook. For derivative traders, this deliberate move to stabilize the currency will likely suppress implied volatility in the USD/CNY pair over the coming weeks. This creates an environment where selling volatility, perhaps through short strangles or straddles, could be a viable strategy. The expectation is that the PBOC will continue to use its policy tools to keep the currency within a managed range. The strong fix makes aggressive bets against the Yuan risky at this moment. Instead, traders could consider positioning for range-bound activity or a slight appreciation by purchasing short-term CNH call options. The signal is that the central bank is defending a floor, providing a tactical opportunity for those positioning against further weakness. Create your live VT Markets account and start trading now.

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EUR/USD traded near 1.1590 in early Asian hours on Thursday, staying below 1.1600. Trading was cautious ahead of a speech by US President Donald Trump on the Iran war and US weekly Initial Jobless Claims due later on Thursday, with US Nonfarm Payrolls due on Friday. Trump is due to speak at 01:00 GMT on Thursday to give an update on the war with Iran. It follows the first joint US-Israeli strikes on Iran in late February, and a White House official said he is expected to cite US military successes and repeat a two- to three-week timeline to end the operation.

Euro Trading And Market Share

Markets have priced a 76% chance of a 25-basis-point European Central Bank rate rise by June 2026, according to Reuters. Some major banks, including J.P. Morgan and Barclays, have updated forecasts to allow for up to three rate rises this year. The Euro is used by 20 EU countries in the Eurozone and was 31% of global foreign exchange transactions in 2022, with average daily turnover above $2.2 trillion. EUR/USD accounts for about 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%). The ECB in Frankfurt sets policy, meets eight times a year, and targets price stability, including a 2% inflation goal measured by HICP. Germany, France, Italy and Spain make up 75% of the Eurozone economy, and trade balance outcomes can affect the currency. The market is quiet now, holding below 1.1600, but we expect a spike in volatility around President Trump’s address. If he signals a clear and swift end to the Iran conflict as anticipated, we could see a “risk-on” move that weakens the US Dollar. This would likely push EUR/USD through the 1.1600 resistance level. Beyond the speech, our focus immediately shifts to tomorrow’s US Nonfarm Payrolls report. After February’s surprisingly strong print of 275,000, which we saw in early March 2026, analysts are forecasting a more moderate gain of 190,000 for March. A number significantly above this consensus could strengthen the Dollar and cap any rally in EUR/USD, regardless of the geopolitical news.

Policy Divergence And Strategy

The bigger picture for us is the clear hawkish shift from the European Central Bank. With Eurozone HICP inflation stubbornly holding at 2.8% in the latest March 2026 reading, the market is right to price in a high probability of a rate hike by June. This policy divergence, especially after the Fed paused its own hiking cycle back in late 2025, provides a strong underlying bid for the Euro. Given this outlook, we believe buying call options on EUR/USD with expirations in the next three to six months is a prudent strategy. This allows us to position for a potential move towards 1.1800 or higher, driven by ECB rate hikes, while capping our downside risk through the immediate event volatility. Looking at historical patterns, we saw a similar policy divergence in 2021 that led to a sustained trend, which could be a roadmap for the rest of 2026. Create your live VT Markets account and start trading now.

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US President Donald Trump said Iran’s ability to launch missiles and drones has been curtailed. He said Iran’s navy is gone, its air force is in ruins, and most of its leaders are dead. Trump said the US does not need oil from the Middle East and does not need the Hormuz Strait. He said short-term gas price increases were due to Iran’s attacks, including tanker attacks, and said the US has plenty of gas.

Military Claims And Strategic Objectives

He said the US will never let Iran have nuclear weapons and that Iran cannot be trusted with them. He said core US strategic objectives are close to completion and that the US is on track to complete its military objectives shortly. Trump said the US would “finish the job” very fast and would “hit them extremely hard” over the next two to three weeks, while discussions continue. He also said US oil production will soon be substantially higher, and that the US could strike Iran’s oil. Following the comments, WTI crude was up 0.75% at $94.85. WTI is a US light, sweet crude benchmark, with prices driven by supply and demand, geopolitics, OPEC decisions, the US dollar, and inventory data from API and EIA, which are within 1% of each other 75% of the time. The initial market reaction pushed WTI crude to $94.85, and as of today, April 2, 2026, prices are holding firm near $98 a barrel. This shows the market is weighing the threat of hitting Iran “extremely hard” more heavily than the claim that the conflict is nearly finished. The key takeaway is the potential for extreme price swings based on conflicting news.

Volatility Strategies For WTI

This environment of high uncertainty is ideal for volatility-based derivative plays. We believe traders should consider buying options straddles or strangles on WTI futures expiring in the next 30 to 60 days. This strategy profits from a large price move in either direction, whether from a sudden escalation or a confirmed end to hostilities. Despite the assurance that we have plenty of gas, recent government data suggests otherwise. The Energy Information Administration’s report last week showed a surprise crude oil inventory draw of 3.2 million barrels, indicating that domestic supply is tighter than stated. This makes the global market more sensitive to any real or perceived disruption from the Middle East. We are also discounting the idea that the Strait of Hormuz is not needed. About a fifth of the world’s daily oil consumption passes through that channel, a fact that has not changed since the conflict began in 2025. Reflecting this risk, insurance premiums for oil tankers transiting the region have skyrocketed, adding a persistent risk premium to global oil prices. If the core objectives are truly completed soon, oil prices could fall sharply. A de-escalation would see shipping lanes reopen and risk premiums evaporate, which would be bearish for crude. We saw a similar pattern after the 2019 attacks on Saudi oil facilities, where prices spiked on the initial news but fell back quickly once production was restored. Create your live VT Markets account and start trading now.

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Australia’s trade surplus widened to 5,686M month-on-month in February, up from 2,258M in the previous reading (revised from 2,631M). The market forecast was 2,500M, based on Australian Bureau of Statistics data released on Thursday. Exports rose 4.9% month-on-month in February after a 1.6% fall in January (revised from -0.9%). Imports fell 3.2% month-on-month after a 1.1% rise in January (revised from 0.8%).

Market Reaction And Timing

At press time, AUD/USD was down 0.05% on the day at 0.6925. A preview section published on April 1 at 22.30 GMT noted the release time of 00.30 GMT. Technical levels referenced for AUD/USD included 0.6962, 0.7025 and 0.7100 on the upside. On the downside, levels cited were 0.6895, the 100-day EMA at 0.6865, and 0.6833. The article also lists drivers of the Australian Dollar, including RBA interest rates, inflation targets of 2–3%, China’s economic conditions, and trade balance outcomes. It notes iron ore as Australia’s largest export, at $118 billion a year using 2021 data. The latest trade data shows a significant surplus, much larger than anyone expected, fueled by a surge in exports and a surprising drop in imports. This reflects a strong underlying performance in Australia’s trade sector. We must consider this a fundamentally positive signal for the Australian dollar.

Context And Strategy

However, we must also look at what happened in a similar situation back in early 2025. A massive trade surplus beat at that time failed to produce a meaningful rally in the AUD because global market sentiment was the main driver. This reminds us that strong local data can easily be overshadowed by bigger international stories. Today, the Reserve Bank of Australia is holding interest rates steady at 4.35%, and recent inflation data has been stickier than anticipated. This has forced the market to push back expectations for any rate cuts this year. A central bank that is hesitant to cut rates is generally supportive for its currency. At the same time, the outlook from our biggest trading partner, China, is improving. Recent data showed China’s Caixin Manufacturing PMI rose to 51.1 in March 2026, beating forecasts and marking the fifth straight month of expansion. This suggests growing demand for raw materials, which is good news for our exports like iron ore, now hovering around $110 per tonne. Given these competing factors, outright long positions on the AUD/USD feel risky. The positive domestic data and a hawkish RBA are pitted against the memory of how global sentiment can dominate. This environment is ideal for using options to manage risk. Therefore, traders should consider buying near-term AUD/USD call options. This strategy allows for capitalizing on potential upside towards the 0.6700 level if the positive local factors prevail. The premium paid for the option represents the maximum risk, protecting against a sudden downturn caused by external shocks. Create your live VT Markets account and start trading now.

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EUR/USD traded near 1.1590 in early Asian hours on Thursday, staying below 1.1600. Trading was cautious ahead of a US President Donald Trump speech about the Iran war, due at 01:00 GMT. The address is described as an “update” and comes after the first joint US‑Israeli strikes on Iran in late February. A White House official said Trump is expected to refer to US military results and repeat a two‑ to three‑week timeline to end the operation.

Key US Data And Geopolitical Focus

US data releases are also in focus, with weekly Initial Jobless Claims due on Thursday. US Nonfarm Payrolls data is scheduled for Friday. Markets are pricing a higher chance of European Central Bank tightening, with 76% odds of a 25‑basis‑point increase by June 2026, according to Reuters. J.P. Morgan and Barclays have updated forecasts to include up to three rate rises this year. Looking back to late last year, we saw the EUR/USD pair trading cautiously below 1.1600, largely influenced by geopolitical tensions surrounding the US-Iran conflict. Markets were waiting for guidance from President Trump’s address and key US jobs data. This period of uncertainty kept many derivative positions on the defensive. As we saw in early 2026, the easing of the US-Iran conflict, following the timeline laid out in that speech, did remove some safe-haven demand for the US Dollar. This allowed the EUR/USD to test higher levels, just as we anticipated. However, the move has since been tempered by persistently strong US economic performance. The most recent March 2026 Nonfarm Payrolls report, for instance, showed the US economy added a robust 250,000 jobs, significantly beating consensus forecasts of 190,000. This strength is keeping the Federal Reserve from signaling any rate cuts, providing a solid floor for the dollar. This complicates the simple “risk-on, dollar-off” trade that many had positioned for.

Trading Implications Ahead Of The ECB

On the other side of the pair, the European Central Bank is signaling a much different path, with Eurozone inflation for March holding firm at 2.8% year-over-year. The market is now fully pricing in the 25-basis-point rate hike for the ECB’s June meeting that we were speculating on last year. This divergence in central bank policy is becoming the primary driver for the currency pair. Given these opposing forces, traders should consider strategies that benefit from a rise in volatility in the coming weeks leading up to the June ECB decision. Options straddles or strangles on the EUR/USD could be effective, as they are positioned to profit from a large price move in either direction. Implied volatility for June options contracts is already ticking up, reflecting the market’s anticipation. We should also closely watch the forward guidance from both central banks, as the divergence is what will create opportunities. Any surprise hawkishness from the Fed or dovishness from the ECB could unwind current positions rapidly. For now, hedging against a breakout seems more prudent than placing a large directional bet. Create your live VT Markets account and start trading now.

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Foreign buying of Japanese stocks was reported at ¥-4B on March 27. This compares with a previous figure of ¥-2,509.7B. Both figures are negative, which indicates net selling rather than net buying. The March 27 value is much closer to zero than the earlier reading.

Foreign Selling Pressure Collapse

We are seeing a major shift in foreign sentiment towards Japanese equities. The dramatic halt in outflows, from a massive ¥2.5 trillion sell-off to a nearly flat ¥4 billion, suggests the recent wave of profit-taking has exhausted itself. This abrupt stabilization is a critical signal that the heavy downward pressure on the market may be over for now. This change comes after the Nikkei 225 pulled back from its recent highs above 42,000 in early March, a drop largely driven by those foreign outflows. The initial selling was likely a reaction to both the rapid gains seen since late 2025 and jitters over the Bank of Japan’s slow but steady policy normalization. The market now seems to have digested this news, finding a potential floor. For derivatives focused on the Nikkei 225 and Topix, this is a time to reconsider outright bearish positions. The sharp drop in selling pressure implies that implied volatility, which likely spiked during the exodus, is now set to decline. We should look at selling puts or implementing bull put spreads to capitalize on both this stability and the potential for a “volatility crush”. The currency market is also key here, as those huge capital outflows put significant downward pressure on the yen, helping push USD/JPY above 154. With foreign selling neutralized, a primary driver of yen weakness has been removed. We should now anticipate the yen to find support, potentially creating opportunities in options that profit from USD/JPY failing to break higher or even drifting lower. Looking back at the major rallies of 2023-2025, they were almost always preceded by strong, consistent foreign inflows. While we are not seeing inflows yet, this cessation of selling is the first step required for a market bottom. Therefore, we should be preparing to scale into long Nikkei futures positions or purchase call options dated for the summer if we see this trend hold for another week.

Positioning For A Potential Bottom

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Australia’s trade surplus widened to 5,686M month-on-month in February, from 2,258M previously (revised from 2,631M). The consensus forecast was 2,500M, based on data from the Australian Bureau of Statistics. Exports rose 4.9% month-on-month in February, after a 1.6% fall in January (revised from -0.9%). Imports fell 3.2% month-on-month, after a 1.1% rise in January (revised from 0.8%). At the time of reporting, AUD/USD was down 0.05% on the day at 0.6925. A preview section noted the release time as 00.30 GMT, with earlier details published on April 1 at 22.30 GMT. Technical levels referenced for AUD/USD included resistance at 0.6962, 0.7025 and 0.7100. Support levels cited were 0.6895, the 100-day EMA at 0.6865, and 0.6833. Background notes said the Australian dollar can be affected by RBA interest rates, inflation targets of 2–3%, and quantitative easing or tightening. They also cited China’s role as Australia’s largest trading partner and iron ore as the largest export at $118 billion a year (2021 data). Looking back to early 2025, we saw a very strong trade surplus of 5,686M in February, which was driven by a 4.9% surge in exports. This painted a robust picture for the Australian dollar at the time, supporting it around the 0.69 level. The economic environment in early 2026 is now presenting a different set of challenges. The landscape has since shifted, as key commodity prices have softened considerably from their 2025 peaks. For instance, iron ore prices are now trading near $105 per tonne, a significant drop from over $130 seen for much of last year. This has been compounded by recent data showing China’s industrial production grew by only 4.5% in the first quarter of 2026, missing market expectations. This weaker external demand is reflected in the most recent trade figures, with the surplus for February 2026 narrowing to just 1.8 billion, well below last year’s levels. The Reserve Bank of Australia has also noted these global headwinds, adopting a more neutral stance in its latest meeting. This contrasts sharply with the more hawkish sentiment we observed throughout most of 2025. Given this context, derivative traders should consider positioning for potential downside in the Australian dollar over the coming weeks. With AUD/USD currently hovering around 0.6540, buying put options could provide a hedge against a further slide toward the 0.6400 support level. The momentum that we saw this time last year is no longer present in the market.

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